Failure demand is a systems concept used in service organisations first discovered and articulated by Professor John Seddon as 'demand caused by a failure to do something or do something right for the customer'. Seddon makes the distinction between 'failure demand' and 'value demand', which is what the service exists to provide. Failure demand represents a common type of waste found in service organizations.
Failure demand is discovered during the application of the Vanguard Method to service organisations.
It has since been used by managers in service organisations and borrowed by systems theorists, authors and management consultants across the world.
Seddon invented the concept when he discovered that the movement of ‘telephone work’ from local bank branches to call centres in the 1980s caused an explosion in the volumes of demand – the number of phone calls soared. He found that the rise in call volumes was attributable to the creation of ‘failure demand’, i.e. customers calling a second time because the bank had failed to solve their problem on the first call. The same phenomenon also occurred in the public sector as local authorities and housing associations moved telephone work into call centres. Demand was much greater than expected or planned for. Seddon argues that increasing demand was not the result of success but of failure. Seddon's work in local government shows that failure demand in such call centres can run as high as 80% of total demand.
The concept of failure demand was adopted in 2008 by the UK Cabinet Office as one of 198 national targets for local authorities. The target was known as NI14 or 'avoidable contact'. The announcement that the indicator would be scrapped came on April 1, 2010. The intention of the target was to cut costs by reducing avoidable contact between local government and its customers. John Seddon was critical, arguing that turning the concept of failure demand into a target would not motivate local authorities to do anything about it. Instead, he said, it would motivate them to under report the amount of failure demand.